Financial advice for a long life

Retiring earlier and living longer: why every woman needs the right financial strategy to make sure their savings will last the distance.

Women in Australia can look forward to long and healthy lives, with the average female life expectancy now at 85 years.  What’s more, women tend to leave the workforce earlier than men which means many women end up spending more than 30 years in retirement.

While this is great news for women, it also highlights the need for careful financial planning – or else you could risk outliving your finances. So whether you are just starting out or winding down your career, there are plenty of ways to get ahead now to make sure your nest egg will be able to see you through.

Boosting your super

Your super is probably the most valuable asset you have when it comes to funding a comfortable retirement. Remember, the more you put into it, the less you will have to rely on the Age Pension when you retire.

But did you know that women’s salaries, on average, are still 13.4% lower than men’s? This means that women’s compulsory super contributions from their employer are lower as well.

That’s where salary sacrificing can make a big difference. By putting a portion of your pre-tax income directly into your super, your nest egg will be able to grow faster. For example, imagine a woman entering the workforce at age 20 with an annual salary of $50,000. If she salary sacrifices just $20 a week throughout her working life, she could end up with around $44,000 extra in super by the time she retires at age 67.*

Making time for family

If you are thinking of taking time out of the workforce to raise kids, you’ve probably considered the short-term impact this will have on your household budget. But have you also worked out what it could mean for your retirement savings? You won’t be receiving employer super contributions while you are not working, which can really set you back by the time you are ready to retire.

That’s why it’s important to plan your career breaks carefully. You could consider putting a little bit extra into super to make up for what you’ll lose in employer contributions.

You can make a personal contribution at any time (while under age 65) – either before your career break or when you are back at work. But as with most investments, the earlier you put money in, the longer it will have to grow.

Going it alone

Since women live longer than men, if you are in a relationship it’s worth considering the possibility that you may outlive your partner. In fact, the number of widowed females aged 85 and over is significantly higher than men. So even though it may be unpleasant to think about, it’s important to know how you’d manage your finances on your own.

Here’s something else to keep in mind: every year in Australia, over 49,116 marriages end. And while divorce is difficult for both parties, women tend to be financially impacted the most. So if you are a full-time homemaker who depends on your husband or partner’s income, then you need to have a back-up plan so you can keep building your retirement savings if your relationship ends.

Planning your retirement income

Once you retire, your lifestyle needs will probably change over time. In your early years of retirement, for instance, you might want to focus your time and money on more family time, travel and other leisure activities. Then, as you get older, you will probably have to spend more on health care.

It’s also worth understanding the different ways you can access your super when you retire. You might choose to cash it out as a lump sum, so you can immediately pay off any outstanding debts. Otherwise, you might prefer to take it as a regular income stream by setting up an account-based pension or buying an annuity. As a first step, ask our financial advisors about your options, so you can decide which one is best for you.

Our advisors can help

Every woman’s situation is unique, and their financial strategy should be too. Our advisors can give you the right guidance at each life stage so you can make the most of your money and look forward to the future with confidence.

Meet our team and contact us for a conversation about how we can help you achieve your goals.

*Calculated using ASIC MoneySmart Superannuation Calculator. Assumes an investment return of 5.7% pa, administrative fees of $50 pa, investment fees of 0.5% pa and tax on earnings of 7% pa.